Whilst the number of cohabiting couples is ever increasing, their rights unfortunately remain the same, that is, entirely different to those of married couples.
Should a cohabiting relationship break down there is no clear right for either to make a claim against the other for a share of assets or maintenance. Such couples are left to rely upon the principles of trust, contract or equity.
There is, however, a compelling preparatory contractual method by which cohabiting couples can seek to protect themselves should the worst happen. This is by entering into a Cohabitation agreement. Such agreements provide an element of certainty and a degree of protection, clearly defining how it is intended assets should be split as well as how they should be dealt with throughout the duration of the relationship.
What can a cohabitation agreement cover?
- The ownership of each asset be it already owned or to be purchased in the future;
- The extent of each party’s interest in the home they live in or are to live in and any other property owned jointly or by one party;
- How expenses are to be split and paid for;
- How income is to be held;
- Who shall be responsible for past and future liabilities and in what proportions they are to be paid;
- Whether the terms shall terminate or be reviewed upon the birth of a child of the parties;
- Arrangements as to children;
- When the agreement shall terminate, including upon marriage and whether it’s terms shall be converted into a pre-nuptial agreement;
- How disputes are to be resolved should the relationship breakdown, including the method by which the home should be sold.
How to enter into a cohabitation agreement.
Once terms are agreed, to make the agreement hold as much weight as possible based on the principles of contract law it must be:
- Clear and unambiguous
- In writing
- Signed as a deed in the presence of an independent witness and dated
- Signed only after both parties have sought independent legal advice.
Each party should provide full and frank disclosure as to their financial positions. This together with independent legal advice will not only show that both parties knew what they were entering into, by understanding the terms, but also goes to prove that neither party was pressured or unduly influenced into entering into it.
Whilst a cohabitation agreement can seek to protect the parties on the breakdown of their relationship it does not protect them or provide either of them with any right should one pass away. It is therefore prudent to make a will at the same time to provide for the other on death.
Cohabitation agreements also provide reassurance and guidance for the couple throughout their relationship and ultimately can save huge costs of having to seek redress in the courts should there be a dispute or the relationship ends.
Couples who live together and who are not married can benefit from entering into a cohabitation agreement. Below are the advantages of doing so in respect of the property:
Advantages of entering into a Cohabitation Agreement
- A cohabitation agreement provides evidence of the parties’ intentions which can be enough to avoid protracted and expensive arguments both in and out of court should the relationship break down.
- The proportions of each party’s ownership are made clear.
- The agreement can set out who is to pay the mortgage and in what proportions, including what impact any change in these circumstances might have on the ownership shares.
- If one party were to pay off a lump sum of the mortgage, it can show what effect that would have on the shares.
- If one party wants to sell, the agreement can detail the process by which that is to take place including any opportunity for one to “buy out” the other.
- It can also provide for certainty as to who is to pay the outgoings.
The advantages continue over and above those which simply relate to the property including:
- The agreement can detail any maintenance to be paid should the relationship breakdown.
- If there is or will be a joint account, the agreement can specify how the couple is to contribute towards it and how the balance would be split on separation.
- The agreement can include how a car is to be purchased, in what shares it would then be owned, and whether on separation it is to be sold or bought out.
- The agreement can also provide for gifts, separate assets, or jointly purchased items, providing in each case for ownership and division or sale.
The disadvantages of NOT entering into a cohabitation agreement are:
- There is no such thing as “common law husband and wife” so there are no clear rights for cohabitees upon the breakdown of the relationship.
- Disputes between former cohabitees which reach the courts often take the form of very long-drawn-out, costly and stressful arguments over what the parties originally intended if there was nothing written down.
- If one person owns the property or the shares are unequal, and the other party contributes to the mortgage or makes significant improvements, it could be argued that they have established a beneficial share or more of a share in the property than was originally planned.
In summary therefore, it is prudent to set out the parties’ intentions from the start. When such an agreement is entered into with the benefit of independent legal advice, and with full and frank disclosure then its enforceability can be difficult to challenge and both parties can rest assured that the formal parts of their relationship are clear and certain. The Separation Agreement will act as a very good guide throughout, and ultimately, should the worst happen.